Indonesia tax office eyes exit from Finance Ministry amid probe

JAKARTA (Bloomberg): Indonesia’s tax officers are mulling a proposal to split away from the Finance Ministry as a probe into a US$20 billion scandal looms over them, according to people familiar with the matter.

A majority of tax officials support the plan that would remove the agency from under Finance Minister Sri Mulyani Indrawati’s (pic) watch, said the people, who asked not to be named, as they’re not authorised to publicly discuss the matter. The move would likely need approval from parliament and from President Joko Widodo to be realised.

Officials have held meetings to discuss the proposal and circulated state documents that would support the move, one of them said. A document that is already in the public domain discusses the government’s plan to form a tax revenue body by next year.

Mulyani is already battling a crisis of confidence on two fronts as the government starts an investigation into more than $20 billion in suspicious transactions that the state watchdog found at her ministry.

On one hand, Indonesians are calling for stronger action to root out corruption at the tax office. On the other, her moves to discipline officials who flaunt their wealth have led to discontent among some civil servants.

The finance minister has over the past few years focused on building the public’s trust in order to improve tax compliance, which remains among the lowest compared to peers.

Expanding Indonesia’s revenue base, especially among taxpayers, is key to helping the government improve its fiscal standing and even credit ratings.

The tax office is currently focused on institutional reform to become "strong, credible and accountable” through five pillars including structural, human resources and database improvement, said spokeswoman Dwi Astuti in response to Bloomberg questions on the plan.

A representative for the finance ministry didn’t immediately respond to requests for comment.

The plan to split from the ministry has taken on more urgency recently as tax officers are concerned after hearing the parliament may form a special panel to investigate them, said the people.

Proposals to have an autonomous tax agency have been discussed by at least two previous finance ministers, but parliament has yet to discuss the matter during Mulyani’s time.

Former finance chief Bambang Brodjonegoro said the move would help boost state receipts despite opposition from several corporate taxpayers.

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Indonesia , Mulyani , tax , office , corruption


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